Monday, September 14, 2009

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling

5 lessons on how to strengthen finances and limit damage in next crisis | Ecommerce Journal-more about virtual economy|e-commerce and money news|articles|forex and stocks news|banks|investment|gambling:
"The real problem with asset allocation isn't that it no longer works, but that people expect that it will always work. And that's just not true. The 2000-02 bear showed that even sophisticated asset allocations can't guarantee you won't lose money in a lousy market. 'That doesn't mean asset allocation is a bad idea,' says Harvard economics professor John Campbell. 'If vaccines don't work for swine flu, it doesn't mean you shouldn't vaccinate for other types of flu.'

And if you look at the numbers, you'll see that proper diversification did you considerable good in this meltdown....If you held a mix of 35% U.S. stocks, 25% foreign stocks, 10% cash, and 30% fixed income (including government and high-quality corporate bonds), you would have lost just 28% between Sept. 1, 2008, and the market's bottom of March 9. By comparison, the S&P 500 was down nearly 50%."
The other 4 lessons were good too.

Very good article. Definitely recommend for investments (including SIMM--REQUIRED)

HT: Wayne Marr

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